Saturday 22 September 2018

Ocado reveals losses and warns over ongoing hit from investment plan

The group reported pre-tax losses of £500,000 on a 52-week comparable basis to December 3, down from £12 million profit a year earlier.

Ocado has fallen to a full-year loss and cautioned over a hit in 2018 from investment in warehouses and its IT platform.
Ocado has fallen to a full-year loss and cautioned over a hit in 2018 from investment in warehouses and its IT platform.

By Holly Williams, Press Association Deputy City Editor

Online grocer Ocado has slumped to a full-year loss and warned that earnings will be knocked by the cost of developing its new warehouses and IT systems.

The group reported a pre-tax loss of £500,000 on a 52-week comparable basis to December 3, down from profits of £12 million a year earlier,  despite seeing sales rise 12.4%.

It cautioned that underlying earnings in the 2018 financial year would “reflect” the costs of investing in its UK logistics hubs, which include a distribution centre in Andover, Hampshire, and its technology platform.

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Ocado chief executive Tim Steiner is looking to transform the group into a technology provider for retailers worldwide (Ocado/PA)

The group – which delivers food for supermarkets Waitrose and Morrisons as well as own-brand goods – is planning to fork out £210 million over the year ahead, while it also announced that it was issuing an extra 5% of its share capital with investors to raise money for its technology business.

It said full-year sales are expected to rise by 10% to 15% over the 2018 financial year, which would mark a slowdown on growth in previous years.

But it expects earnings to ” improve significantly” for the 2019 financial year thanks to investment in the business.

Ocado chief executive Tim Steiner said: “Now is the time to take advantage of our growth opportunities.

“We will invest to ramp up our new solution in both Erith and Andover and to have the right resources in place to meet growing demand for the Ocado Solutions offer.

“We believe that taking advantage of these international opportunities now will make our virtuous cycle turn faster in the years ahead.”

Ocado is looking to broaden itself from a UK online delivery grocery service into a technology provider that offers warehouse capability and digital commerce platforms to other retailers worldwide.

It recently signed its third international partnership and its first foray into North America after reaching a deal with Canadian retailer Sobeys.

Now is the time to take advantage of our growth opportunities. Ocado CEO Tim Steiner

The group had already announced a partnership with French supermarket giant Groupe Casino late last year, having struck its first international deal in early June, although it has so far kept the customer anonymous.

Its full-year results also show that, while it fell into the red on a bottom-line basis, retail earnings lifted 4.5% to £79.2 million for the 52 weeks and order numbers rose 14.3%  to an average of 263,000 orders per week.

Ocado said its average basket value dropped slightly to £107.2 as new trends of shopping via mobile phone and using its Ocado Smart Pass saw customers order fewer goods but more often.

Ocado shares fell 7% amid hefty wider falls on the London market.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “On paper Ocado doesn’t look like much of a business, it was barely profitable in 2017 and costs are rising faster than revenues.

“However, Ocado’s value lies in its ability to license out its online delivery technology to grocery partners across the globe, and recent deals on this front have confounded those who doubted Ocado could deliver the goods.”

Press Association

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